|
|
ESTATE PLANNING ISSUES 1:
Elective Estate
By Attorney William Edy
Prior to this year, a married person could die and effectively disinherit his or her spouse through the use of “pay on death” accounts, beneficiary designations and revocable trusts. Since our Florida legislature changed the law in October 1999, this is no longer easy to do.
The state court on petition from the disinherited spouse will total up all of the deceased’s assets, even if assets were placed in a revocable trust, and even if a bank or brokerage account has the deceased’s children listed as the only beneficiaries. The Court will then award the disinherited spouse 30% of the total “elective estate”. When the legislature changed the law, they considered tying the percentage to the length of a marriage and increasing the percentage to 50%, as in some northern states, but left the percentage at 30%.
This law may have an impact on second marriage couples who desire to leave all to their own children. No matter what a couple agrees to in conversation, unless there is proper legal documentation, such as a pre- or post nuptial agreement, the surviving spouse at the behest of the surviving spouse’s children, may and probably will elect to take 30% of the estate.
The rules are very complex. For example, if the spouse provides for the surviving spouse with a QTIP type trust, paying only income, it may only count for half of the award to the survivor, necessitating putting 60% in the trust until the surviving spouse dies. If the surviving spouse is incapacitated at that time, it may even be the legal guardian’s duty to elect to take against the estate and against the wishes of the first to die.
It may seem that this new law is a gift to the insurance industry, since life insurance may be the most economical way to fund the 30% elective share, because the face value of the policy will not increase the size of the elective estate. Only the cash value will be considered in calculating the elective estate, which in most cases is much less than the eventual proceeds on death.
Consideration of this new legislation is extremely important to couples in second and subsequent marriages, each of whom may have children by prior marriages. It is always better to anticipate and provide for potential conflicts between children and a surviving spouse than to leave the conflict to the resolution of the probate courts.
Those who executed wills or revocable trusts in second marriage situations may want to have their estate planning attorney review their documents to ensure their wishes will be carried out after their death without expensive and time consuming court involvement in such private family matters.
Read More:
ESTATE PLANNING ISSUES 1 | ESTATE PLANNING ISSUES 2 | ESTATE PLANNING ISSUES 3
|
|
